2002 (6) TMI 6 - HC - Income Tax

Estate Duty Act, 1953 - Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the interest charged by the Assistant Controller under section 70 of the Estate Duty Act on the demand of estate duty determined provisionally under section 57, is not sustainable in law ? We answer the question in the affirmative, and against the Revenue

Summary

Issues involved:
Interpretation of section 70 of the Estate Duty Act regarding the charging of interest on a demand arising from provisional assessment.

Analysis:
The case involved a reference made by the Income-tax Appellate Tribunal, Indore bench, at the instance of the Revenue, under section 64(1) of the Estate Duty Act, 1953. The question raised was whether charging interest under section 70 on the demand of estate duty determined provisionally under section 57 was legally justified. The accountable person, widow of the deceased ex-Ruler of the erstwhile State of Dhar, initially disclosed the estate value at Rs. 81,50,000, which was later revised to Rs. 40,83,518. The final assessment completed in 1986 included interest amounting to Rs. 20,12,509 under section 70(1) of the Act.

The Appellate Controller held that section 70 did not apply to demand raised on provisional assessment, leading to an appeal by the Revenue to the Tribunal. The Tribunal dismissed the appeal, prompting the Revenue to seek a reference to the High Court. The Revenue argued that interest was chargeable even on provisional assessment demands, citing a Karnataka High Court decision. In contrast, the assessee contended that no provision allowed interest on amounts from provisional assessment, citing a decision of the Patna High Court.

The High Court analyzed sections 57 and 70 of the Act, emphasizing that section 70's provisions for interest applied after final assessment, not provisional assessments. The Court cited the Bettiah Estate case, stating that interest could only be imposed under section 70 after a definite period of postponement of payment. The Court disagreed with the Karnataka High Court's view that interest could be levied on provisional assessment demands under section 70(1), emphasizing that no interest could be charged without a specific order for postponement of payment.

Ultimately, the High Court ruled in favor of the assessee, stating that interest under section 70 could not be levied on a demand determined provisionally under section 57. The Court's decision was transmitted to the Tribunal for further action.